Thursday, March 30, 2006

Pollution Tax in China

One of the major items discussed at the current National People's Congress sessions is pollution. Effective this past weekend, China has started imposing a tax on luxury cars in an effort to reduce air pollution. Cars like SUVs (Sports Utility Vehicles) or Mercedes Benz will be taxed at 3 percent to 20 percent, depending on engine size.

Yet analysts are not confident that these new measures will help reduce pollution level or even affect car sales in China. The luxury car market, although developing, still consists a small share in China's total car sales. Also, consumer demand for luxury cars may not be affected too much, because those who can afford to buy luxury cars in the first place probably will not be overly concerned with the tax increase. Other commentators suggested that a better way to tax luxury car is to take account of a vehicle's fuel efficiency, not just the size of the engine.

Another alternative is to impose an across-the-board fuel tax. State administrative officials said that the fuel tax is not in place because of concerns of general high oil prices in the world.

Other unlikely items to be taxed include disposable wooden chopsticks, planks for wood floors, luxury watches, golf clubs, yachts, golf balls and certain oil products. These new taxes are intended to reduce pollution and conserve energy. China has been criticized for consuming large amount of wood from Southeast Asia to produce its disposal chopsticks. The luxury goods tax targets the political and business elites who have reaped huge profits from the booming economy.

It is no news that pollution problems have global consequences. Developed countries have long realized that their efforts to reduce pollution may well be futile in face of the ever intensifying rate of industrial production in countries like China and India. Yet how can the West make the case to developing countries that, a century after the industrial revolution and the subsequent material wealth and environmental degradation it caused, it is now not right for the developing countries to do the same?

Sources:, Combating Pollution Has Priority, Feb. 14, 2006
ABC News Online, Latest Import from China: Filthy Air, Mar. 27, 2006
Associated Press, Analysts: China Pollution Tax Ineffective, Mar. 25, 2006
New York Times, China Aims Taxes at Cars and the Rich, Mar. 22, 2006

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